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The Regretsy PayPal Debacle and Online Payment Alternatives

By (view all posts by brwood)
at 9:58AM Wednesday December 7, 2011
under Personal Finance

Recently (Monday?) PayPal pissed off a lot of people. You may have seen the story on Jezebel, Consumerist, or a bunch of other outlets: Regretsy collected $2 donations from thousands of users to buy toys for needy kids for Christmas via a PayPal "Donate" button. PayPal froze the account and went on to provide a very nice example of how not to treat your users. Anyway, last I heard it was being worked out--someone at PayPal issued an apology and promised a donation to the Regretsy cause.

Still for many people online it was one more nail in the coffin of PayPal. All you have to do is a little Googling to read page after page of complaints against them. So here are a handful of viable alternatives I was able to find while looking online. There are pros and cons to all of them, and most likely you will still need a PayPal account in order to pay some online sellers. But you should definitely check these out:
Venmo - This was created as a peer to peer way to split up the check after dinner via your cell phone. Best part about it? It's free! Not sure if you can use it via any email address, but you can send cash to a friend via their cell phone number and a text message. You link your debit or credit card directly to your Venmo account and just text it to whomever you owe money to via the free app on their site.

Amazon Payments Personal - Amazon created a way for buyers to pay merchants who sold via their site years ago. More recently they expanded to allow you to send and receive money almost exactly the same why PayPal does. On top of that they also allow you to send money to any U.S. cell phone number as well as email addresses, and Amazon aliases. You can withdraw the money and spend it in the real world, or spend it shopping on Amazon, which is as good as cash.

Serve - Backed by American Express these guys are fairly new, but seem to be working hard and coming up fast. They do person-to-person money transfers via mobile phone apps and email. On top of that you get a physical debit card that you can use at any location that takes Amex to spend the money in your online Serve account, as well as withdraw cash at ATMs.

ING Direct Person2Person - This is really just a feature of an ING online checking account. As such it's hardly in the same league as these other services, but they are trying. It requires that you know the last 4 digits of someone's bank account number as well as their email address. Somehow they thought long and hard and came up with something harder than just mailing a check to someone, or having the banks online bill pay send it to them. ING fail.

WePay - These guys seem a lot like a bridge between the tiny little guy and the small business seller starting out on the internet. Sure I have used PayPal to send invoices for work done to people online and to collect money from my endurance racing team, but I have also seen firsthand how lousy it is at organizing and reporting stuff if you start doing a lot of business. WePay allows customers to pay you with a credit card just like you were any other online merchant.

However none of these are good enough for eBay (you have already heard me rant about eBay issues in a previous post). There are four accepted ways to be paid by someone if you are selling on eBay: PayPal (now fully owned by eBay), ProPay , Moneybookers (soon to be Skrill) or Paymate. You can also use your actual merchant account if you are a legitimate business with a credit card account. Of course if you are an eBay seller the forces of the market are against you. If you are the eBay seller who only takes Paymate and the next items seller takes PayPal, you are not getting that sale unless the buyer is also anti-PayPal or you have a unique product or lower price.

So there you have it. Looking at the alternatives there is no reason to use PayPal for person to person social transfers, or setting up your online shop. There is one very good reason to use it though: eBay.

Have you used any of the above alternatives to PayPal?  Tell us about your experience or add your own recommendation in the comments below.